Standards in the BuytoLet market have improved and tenants are less willing to accept sub standard and unloved properties paying a higher rent for well presented and well located properties. Specification of the property is important and landlords need to consider regular upgrade and maintenance works at the very least between tenancies and every three years.

Zoe Rose, head of lettings for Strutt & Parker said “if you regularly maintain your rental property on an annual basis, even when your tenant is situ, then overall you are likely to spend less than a major upgrade every three to five years. You are also sending a clear message to your tenant that you are a conscientious landlord that cares about them and the property. They in return are likely to look after your investment and appreciate their surroundings and do their very best to keep your property in immaculate order.”

“We do have a few clients that have enjoyed healthy rent increases over three to five years linked to RPI without doing much to their property during the tenancy. When the property comes back to market, they are shocked to learn that they need to spend significant funds in order to support the same level of rent achieved before.”

“Like any investment the return can go up or down and you wouldn’t run any other assets dry and expect to maintain the same level of return. It is the same with rental property. You need to keep aside sufficient funds to upgrade and reinvest in order to optimise the returns.”

Stephanie McMahon said “the increase in the Private Rented Sector across London with 79% more household renting in 2011 than 2001, shows just how large the market is. In these types of conditions investors must put back more to reap the financial benefits. Tenants are looking for longer leases too, with 17% increase in those taking longer leases in the third quarter of 2013. Therefore landlords need to invest more to fight for those tenants.”

“It is much better to plan properly than be stung with an extended void period or accepting a very low rent just to secure a tenant. Having a well thought out maintenance and upgrade plan really does pay dividends in the end.”

The Landlords Calculator designed for Property118 readers is very easy to use and can help you with your own BuytoLet strategy. You don’t need to download any extra software whatsoever. It allows you to analyse returns and other important numbers relating to any residential investment property deal with ease.

You may want to listen to this first

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Our friends Rob Bence and Rox Dix from the Property Podcast have produced an excellent audio programme which explains various options to calculate rental yields.

They have also added a very cool, funky intro to their Podcast so do check it out, I even get a mention 🙂 iAmAlandlord is my Twitter handle by the way – which makes no sense to this blog unless you listen to the audio.

You don’t need any special software or devices to listen to the Podcast, all you need is speakers to be connected to your PC and turned on and to click on the play button on the bar below.

If you are not good with maths or calculators you can apply everything you will learn from the audio very simply by using our Landlords Calculator below.

Enjoy!

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Last week I was presented with a Manchester based buy-to let investment opportunity which looks particularly attractive. The gross yield is just over 11% but with the benefit of gearing, and having allowed for all costs, the cash on cash returns are coming out at 12.5%.

I have done some due diligence (you should always do your own though, please don’t rely on mine) and part of that was checking out the availability of finance on these properties.

The only possible drawbacks I can see thus far is that the maximum mortgage is 65% of value plus a lender fee of £995 added to each loan. This is due to the properties being priced at £42,500 and being sold as a new development. The issue with this is that BM Solutions are the only lender offering terms. As BM Solutions are part of the Lloyds Banking Group that can sometimes cause problems due to the group having a rule not to provide more than three mortgages to any one client. The Lloyds Banking Group includes Lloyds Bank, BM Solution, The Mortgage Business, Halifax and C&G.

If you can live with that, and especially if you are married or have a partner, and you and your partner have no mortgages with any of these companies, you could, theoretically at least, buy six of these properties, i.e. 3 each.

The alternative, of course, is to buy the properties for cash and then look to refinance them based on market value after say 6 months.

In the meantime, these are the numbers that came out when I analysed the deal using the Property118 Landlords Calculator:-

Property valued at £50,000 each (15 available, 18 already sold at full price)

Interest rate 4.84% (Loan via BM Solutions – IFA to advise best product, this one was selected at random for illustrative purposes)

Mortgage interest £115.34 per month

I have estimated that 35% of rental income will be required to fund the costs of; advertising/letting, management, Gas checks, maintenance, ground rents, service charges and void periods This equates to a monthly averaged cost of £140.

Therefore, cashflow based on the current interest rate is £144.57 per month

Based on these figures the return on equity is 12.5% on cashflow alone. This is net annual cashflow expressed as a percentage of the equity in the property. This calculation is also referred to as; return on cash, cash on cash return, return on capital employed/invested, ROC and ROCI. A 12.5% return on equity is far better than you would get in a bank account and far greater than you can borrow money for too. Over the long term you may also wish to factor capital appreciation into the equation too.

This deal breaks even when interest rates hit 10.9%

If this is of interest and you would like to download details of the development with a view to arranging a viewing and/or making an offer please complete the form below.

Our Landlords Calculator is a very easy to use, you don’t need to download any extra software whatsoever. It allows you to analyse returns and other important numbers relating to any residential investment property deal with ease.

You may want to listen to this first

You need to be a member to use this calculator. If you are already a member please log in - see orange text at the top right of this page. If you are not a member please see http://www.property118.com/membership/40048/

Until now landlords and their professional advisers have struggled with traditional calculators and spreadsheets to calculate rental yields, cashflow, returns on equity and the interest rates a property deal achieves break even or neutral cashflow.

Our Landlords Calculator takes you through set of numbers and provides easy to follow explanations a step at a time making all of the above simple.

Simply follow the the instructions, type in your numbers and calculator does everything else for you. The key figures you need, together with explanations, appear on screen as you go.

When you have completed the process you will be given an opportunity to add a title to your masterpiece and have a neat report emailed to you for future reference or, if you are a professional adviser, to present to your clients.

Landlords Calculator Reviews

Check out the reviews below which have been left by other landlords and associated professionals. We appreciate all feedback so please let us know what you think of our landlords calculator by leaving a review of your own in the comments section below.

NOTE – our Landlords Calculator was updated and re-published on 25th July 2013. Version 1 was first published on 6th June 2013

Earlier this year we spotted an opportunity to set up a buy to let Estate Agency. However, due to lack of resource (time) very little has been done other than a dozen or so sales on behalf of developers, plus setting ourselves up with The Property Ombudsman Service and organising Professional Indemnity insurance to keep ourselves legal of course.

The reason we haven’t got around to growing the buy to let Estate Agency business is that our passion is facilitating the sharing of best practice amongst landlords and letting agents on the Property118 forum which I set up just over two years ago. Prior to that I was a commercial finance broker and I’ve been a landlord since 1989.

The opportunity is a very simple one. Nearly 200,000 landlords and associated professionals subscribe to our daily newsletters and engage on the Property118 forum. Some of these people are no doubt in the market to buy more property. It occurred to us that most properties are sold with vacant possession, however, for landlords that can be a bit of a nightmare as both the vendor and the purchaser both experience costly void periods.

Rightmove and the Zoopla Property Group portals are ideal to sell properties with vacant possession but if a landlord wants to sell or buy a tenanted property these portals are far from perfect as there’s no search facility for buy to let property. Furthermore, their interfaces are not geared up to show rental yields, returns on capital invested, costs of letting etc. At Property118 we have created a landlords calculator to work all of these things out

As we haven’t got time to source properties to sell, never mind to prepare sales particulars, do floor plans, arrange viewings and progress chase offers through to completion, our idea is to work on a split commission basis with other agents.

We will showcase properties on the Property118 forum and link to them in the daily Newsletters. Enquirers will be landlords who may well already own properties in the area, hence for agents who partner with us on this venture, all referrals will be good leads for future sales and letting opportunities as well as prospective purchasers of the property which is being marketed.

From the landlords perspective, they will be presented with properties which are already let and will have no void periods and perhaps most importantly, without any buyers premium attached to them. The sales particulars will include details of the tenancy including:-

rent currently being paid

profile of the tenant

time already in the property

management fees currently being charged

other expenses relating to the management/maintenance of the property

This information, together with an indicative financing quotation will enable us to calculate not only rental yields but the cash on cash equivalent annual returns after all costs including mortgage, insurance, lettings and management, a sensible maintenance budget and where appropriate any ground rents or service charges. This will enable investors to compare cashflow returns on their money to the returns they are currently receiving elsewhere on their investments. The potential for capital growth is obviously a primary reason for people to invest into property too of course.

We will not allow this activity to overwhelm what we do here at Property118, therefore, we will cherry pick the properties we want to promote based on those which we believe make sense to buy as investments.

It is unlikely that we will be in a position to accept instructions directly from landlords to sell their properties due to the lack of infrastructure to provide a sufficiently professional service, i.e. floor plans, viewings, for sale signs etc. Therefore, any such enquiries will be referred back to the agencies we end up partnering with. Landlords are, of course, also welcome to introduce us to any agencies they are already working with as we will not get tied into any exclusive contracts. Our independence is vitally important to us.

I would like to have a chat with any agents who see some mileage in this opportunity. I have some ideas on splitting commissions but I am very open minded at this stage as the project is very much in its infancy.

If you would like to chat please comment below, email me – mark@property118.com or call me on 07834 754 223.

Learning from other peoples experiences is often far more cost effective than making mistakes of your own! Advice on forums is no substitute for professional advice because comments and opinions are not insured.

HOWEVER, discussion can lead to ideas which you may not have previously considered and can often point you in the right direction, even if only to point you to the right person, piece of legislation or to find out how others have dealt with similar issues. The easiest way to communicate with other landlords and letting agents, without even having to move away from this screen is ….. read on

Not only does this calculator make it very easy for you to analyse a property purchase you are considering, it is also useful to run the numbers for properties you already own as well as explaining industry jargon in simple terms.

Time is money, knowledge is power and protecting yourself can be crucial. Why is it then so many landlords choose to self-manage when they don’t own enough of properties to justify the time required to be fully clued up with everything they need to know?

Perhaps they think they are saving themselves money? Well that depends on what they are basing figures on of course. The most cost effective way we know of to manage rental property is.. read on

This can be a win/win for sellers and buyers. From a buy-to-let investor point of view we find landlords welcome the fact that they are getting rent from day one and have no need to set about paying rental agency fees to locate tenants.

From the sellers perspective, keeping tenants in situ also has the added benefit that properties tend to view better when lived in, provided of course the tenant is reasonably tidy. Where do 10’s of thousands of investors go to buy tenanted properties though?read on

You can’t take your property portfolio with you when you “pop off” but unless you’ve done your planning right you loved ones might not be able to keep the properties either.

Read why here and use our Landlords Calculator to crunch some numbers to work out a cost effective way to minimise the risks of leaving your loved ones in a financial mess as well as an emotional mess. read on

We have had some excellent suggestions about the option we created last month for readers to create member profiles. We have now introduced a premium upgrade for businesses which would like to promote their products and services to Property118 readers in a subtle way. Don’t worry, we are still not allowing advertising!

Member Profiles remain FREE to set up and as all comments left in discussion threads link back to member profiles we see no reason not to allow businesses to add their company logo, telephone number, email address and a link to their website to their member profiles should they wish to do so. This should also encourage more businesses to engage in discussions and to help other readers as it will give them more exposure to their member profile. Everybody is a winner! see members